Economy 2020: Solid momentum from 2019

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Vietnam's economy has many motivations for strong growth. Photo: S.T.

Strong growth momentum

It is not difficult to foresee that, in 2019, socio-economic targets can be achieved, even surpassing the 12 targets set by the National Assembly. Moreover, Vietnam has achieved many surprising results such as its national competitiveness, which was assessed by the World Economic Forum to improve dramatically on all three pillars of institutions, infrastructure and skills, ranked 67 among 141 countries and territories, up 10 places compared to 2018.

Reporting on the socio-economic situation in 2019 at the National Assembly, Prime Minister Nguyen Xuan Phuc affirmed that the economy grew beyond the set targets while maintaining macroeconomic stability, controlling inflation and strengthening and expanding the major balances of the economy.

Assessing Vietnam's economic growth, domestic and foreign experts have acknowledged the country’s outstanding efforts. The International Monetary Fund (IMF) said that Vietnam and four other economies in Southeast Asia are among the top 20 economies with the largest contributions to global GDP growth this year. In addition, Fitch Solutions, the macro researcher at Fitch Group, said that a good growth signal in the third quarter of 2019 is an important basis for Fitch Solutions to forecast Vietnam’s GDP growth to 6.9 percent in 2019 and 6.8 percent in 2020. The Asian Development Bank (ADB) assessed Vietnam's economic growth in 2019 at 6.8%; Standard Chartered Bank forecast Vietnam's economic growth to increase 6.9 percent in 2019 and this rate will be maintained until 2021.

In particular, if we look at each component indicator of the economy, we will see a very clear improvement. Typically, the rate of labor productivity growth was quite good (nearly 5.9 percent), helping maintain the average growth of labor productivity in the 2016-2019 period at 5.8 percent per year, exceeding the 5-year target (5.5 percent per year). The growth has gradually decreased dependence on the mining industry, credit, manufacturing, processing, technology and innovation. Not only that, inflation and consumer price index (CPI) always remain at low rate of 2.7 to 3 percent. Economic scale was expanded, reaching about US$266.5 billion, per capita reached US$2,786 (in 2018, it was US$2,590).

According to Dr. Nguyen Duc Thanh, Director of the Institute for Economic and Policy Research (VEPR), although the world economies are in decline, Vietnam has many positive results due to advantages from capital and investment shifting together with strong reforms.

The economy continued to grow at a high rate because of the inheritance of previous years' growth momentum and new motivations, especially the shifting in the mining industry, significantly contributing to the economy. In addition, many Japanese and Korean investors have also shifted their investment from China into Southeast Asian countries, helping Vietnam to benefit, forming high leaps for development from infrastructure to human resources.

Removing barriers and difficulties

In spite of positive results, the Government’s leaders still said that our country has shortcomings, difficulties and challenges, of which there are factors in the short, medium and long term to be solved effectively in the future. Of which, the macro economy is stable, but some factors are not really sustainable. The progress of disbursement of public investment is slow, the agricultural sector faces many difficulties, equitisation and divestments of state-owned enterprises are still behind schedule and the handling of bad debts by banks is still a problem.

Regarding these issues, Thanh said that Vietnam cannot be subjective to growth, because key industries, such as processing and manufacturing, have lower growth than in the previous year, so it may affect growth of the following year. Therefore, management agencies must closely monitor the market situation, resources, motivation and the growth of other industries to have the right policy for economic development.

In addition, if considering the development stage, the Vietnamese economy still has many issues for discussion. According to Assoc. Prof. Ngo Thang Loi, National Economics University, Vietnam’s economic growth amplitude tends to decrease gradually over a ten-year period. In addition, Vietnam's growth results were much lower than those of other countries in the rapid growth period. If considering 30 years (from 1991 to 2020), Vietnam’s average GDP growth rate reached 7.14 percent, then Korea, in the rapid growth period, approximately four decades from 1961-2000, the average annual growth is about 8 percent, and in Japan, the period from 1955-1973, this rate was 9.4 percent per year.

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Therefore, to gain breakthrough developments in 2020, Vietnam's economy must solve the "bottlenecks" such as disbursement of public investment, productivity and quality, as well as remove barriers in the business environment to continue increasing the competitiveness of the economy. According to experts, the Government should pay attention to further implementing solutions to realise the plan in 2019, thereby forming “solid momentum” for the economy in 2020, specify targets must be clearly defined, thereby stating determination to accomplish and exceed these targets. After that, Vietnam needs to identify new growth drivers for the economy, including the private sector, human resources, science and technology and establish Vietnam's position in the global value chain.